BANGALORE, India — In the wake of last week’s deadly terror attacks on Mumbai, mall owners vowed to step up security, while international luxury goods executives said the tragedy could slow the market’s growth in the short term.
This story first appeared in the December 1, 2008 issue of WWD. Subscribe Today.
Malls in Mumbai were deserted late last week after police advised people to stay indoors.
“It is the scale of what has happened in Mumbai that will cause short-term problems,” said D.K. Nair, secretary general of the Confederation of Indian Textile Industries.
Nair said he did not expect the attacks to have a long-lasting impact, however. “It will impact business confidence for two or three months, but I expect things to recover after that,” he added.
But in the short term, hotels and tourism are expected to take a hit, with foreigners canceling planned visits to India.
As reported on WWD.com last week, the International Herald Tribune postponed its annual luxury conference, which had been scheduled to take place Wednesday and Thursday in New Delhi’s Imperial Hotel. The Paris-based newspaper said it planned to bring the summit to New Delhi in March.
The annual event, hosted by IHT’s fashion editor Suzy Menkes, was expected to have addresses from PPR chief François-Henri Pinault, along with designers Nicolas Ghesquière, Stella McCartney, Roberto Cavalli, Tomas Maier, Dries Van Noten and the Dutch duo Viktor & Rolf.
A host of European luxury brands have planted their first stores in India this year, including McCartney, Hermès, Cartier, Lanvin and others, characterizing the country as a promising future market, but one that is years behind China. Cities lack infrastructure for modern retailing, and the upper middle class is underdeveloped, meaning limited spending power and footfall in stores.
“India is a very small part of our business because of taxes,” said Bernard Fornas, president of Cartier International. “The terrorist attacks are horrible, but they will impact business very little.”
Elisabeth Ponsolle-Desportes, the delegate general of the Comité Colbert, an association of France’s luxury businesses, said the committee recently has been strengthening its ties with India, which is a promising growth market for luxury in the future, despite its current prohibitive tax restrictions.
She said the committee’s 71 members, which include Guerlain and Louis Vuitton, collectively only do 70 million euros, or about $87.5 million at current exchange, of business in the populous nation. Overall, the committee’s members generate 22 billion euros, or $27.5 billion, in net sales.
“The events in Mumbai will most certainly reverberate in India, slowing down an already difficult growth process,” said Roberto Cavalli. “The local market is a receptive and interesting one for luxury goods but maybe not totally ready. As far as I’m concerned, we’re moving very cautiously and we expect to further penetrate India next year. It’s very hard to make long-term estimates on when the market will pick up again since the attacks just took place.”
Despite the attacks, it is understood Alexander McQueen is going ahead with plans to open a boutique in Mumbai, though an opening date has yet to be set. The designer signed a deal with TSG International Marketing Pvt. Ltd. in June to open six stores in India over the next two years.
“Business in shopping malls will be affected for a few days, but will return to normal after that,” asserted K. Ramesh, a Chennai-based senior vice president for business development at DLF Retail Developers Ltd. “I don’t expect much negative impact on foreign investments to India.”
New Delhi-based DLF, the largest real estate company in India, is the developer of the recently opened Emporio mall in the Indian capital, which counts Dior, Cartier, Jimmy Choo, Louis Vuitton and Emporio Armani among the tenants.
Ramesh said because of the economic downturn, real estate developers cannot expect good returns on initial investments for some time as rental rates are down. However, he was hopeful the situation would improve in two or three years. DLF will go ahead with its projects after studying market conditions, he added.
Mumbai, India’s financial capital, faced its worst terror assault in years after terrorists attacked two luxury hotels, the Taj Mahal Palace and the Oberoi, a major railway station, and other public places last Wednesday.
More than 180 people were killed and about 300 injured, including foreigners, in the attacks, with violent standoffs finally coming to an end on Saturday.
Among those killed were the two former owners of French lingerie firm Princesse Tam Tam, Loumia Hiridjee, 47, and her husband, Mourad Amarsy, 49, according to Bernard Kouchner, the French minister of foreign affairs. The couple was killed while dining at the Oberoi. The couple had spent half their time in Mumbai since 2007. Loumia Hiridgee, a native of Madagascar and a French citizen, started the upscale intimates company in France in 1985 with her sister Shama. The company was sold in 2005 to Fast Retailing of Japan. Despite having sold the company, Hiridjee remained a design consultant for the firm. The Princesse Tam Tam collection is distributed in the U.S. by NAP Inc.
The Taj hotel is a major luxury retail hub hosting stores like Louis Vuitton, Fendi, Bulgari, Ermenegildo Zegna and Burberry. Vuitton, Fendi and Burberry said Friday all their employees were safe, but had no information on when the Taj might reopen due to the widespread damage to the building. A Vuitton spokeswoman said the firm planned to open a temporary location, with details forthcoming.
The nearby Oberoi houses boutiques including Salvatore Ferragamo, and a Ferragamo spokesman said the director of its boutique was injured Wednesday night on the street.
This was not the first time Mumbai and other Indian cities have faced attacks from terrorists. Serial bomb blasts have rocked Indian cities eight times this year.
Even before the attacks, foreign investors had been pulling out money from Indian stock markets steadily since January, and stock indices have fallen nearly 60 percent this year. Government officials expect foreign direct investments to continue flowing in, though, owing to the strong fundamentals of the Indian economy. Ajay Shankar, India’s secretary of commerce and industry, said in New Delhi that India had received $17.21 billion in FDI between April and September this financial year, which was 137 percent higher than investments in the first half of the previous fiscal year. He said the government might relax rules further to attract more FDI and take additional monetary measures to boost demand for high economic growth.
India’s economy grew by 7.6 percent in the September quarter from a year earlier, but eased from the previous quarter’s 7.9 percent as monetary tightening curbed demand, according to government data.
Ratings agency Standard & Poor’s does not believe the Mumbai attacks will affect India’s sovereign rating providing there aren’t other acts to follow, it said Thursday. “Based on the scenario that these attacks were an isolated case, we don’t expect there would be negative implications on India’s macroeconomic activities or the government’s fiscal position,” credit analyst Takahira Ogawa said.